Corruption declining in lot of transition countries, Except

chart 10_corruption.gif World Bank has published a new report, “Anticorruption in Transition 3-Who is Succeeding … And Why?” which suggests that incidence of corruption has declined in quite a few of transition economies- Russia seems to be an exception;

“Most observers believe that corruption in Russia has worsened in recent years, although the exact magnitude of recent changes and the severity of the current situation are subjects of continued debate. The Executive Opinion Survey carried out annually by the World Economic Forum (2005) confirms a worsening in experts’ perceptions of the governance environment in Russia from 2004 to 2005. Most notable is a decline in perceptions of judicial independence and protection of property rights and an increase in the burden of organized crime on business. Surveys of small businesses undertaken by the Center for Economic and Financial Research (CEFIR, 2005), a Russian think tank, indicate that corruption fell from 2001 to 2002 but then worsened again by 2004. Russian firms that participated in the BEEPS also showed a similar pattern—a dip in assessments of corruption as a problem for business from 1999 to 2002 followed by an increase through 2005. (Reported bribe frequency rose to 2002 and then stayed level.) However, the BEEPS firms—500 in 2002 and nearly 600 in 2005—also reported a decrease in the bribe tax from 1.4 percent of revenues in 2002 to 1.1 percent in 2005.The most negative picture of corruption in Russia was painted last year by another Russian think tank, Information Science for Democracy (INDEM, 2005), which reported that bribes had increased tenfold in the four years from 2001 to 2005.
These various results point in a similar direction—that corruption in Russia may have improved somewhat in the early 2000s but has grown as a problem in recent years.The decline in the bribe tax as measured by the BEEPS is not inconsistent with growth in corruption overall. The bribe tax measures the share of annual revenues paid in bribes, while the INDEM study reports on the aggregate dollar amount of bribes paid per firm per year. Given the rapid growth in the Russian economy in recent years, the declining bribe tax would still translate into a larger volume of bribery, and appreciation of the currency would increase the dollar-equivalent value even further. While the two sources may agree on the direction of change, however, the magnitude of the BEEPS and INDEM results do differ markedly. The BEEPS results imply an approximate increase in the volume of bribery of 50 percent from 2002 to 2005, while the INDEM study reports a staggering growth of nearly 900 percent from 2001–2005.

These worsening trends occurred despite a number of reforms undertaken by the Russian government to streamline public administration. For example, to ease the entry of new firms the government sponsored new legislation in February 2002 that cut the number of activities that required licensing and lowered the cost of obtaining licenses. Similarly, to improve the system of tax administration, the government lowered corporate tax rates and widened tax bases in 2001.Tax revenues increased and compliance clearly improved as a result (Ivanova, Keen, and Klemm, 2005).Yet the BEEPS results indicate that neither the easing of licensing rules nor reductions in tax rates have led to reductions in the frequency of bribery in these areas. Indeed, unofficial payments for business licenses are among the highest in Russia of any transition country, and Doing Business ranks Russia 143 worst out of 155 countries in “dealing with licenses.”

One explanation for the seeming failure of policy reforms to reduce corruption may be inconsistent or ineffective implementation of these reforms in practice. As Russia spans two continents and eleven time zones, it is not surprising that both the impacts of specific reforms and trends in corruption appear to vary significantly among regions. The CEFIR report (2005) claims that many business licenses “do not seem to be legitimate” even if they may have gotten cheaper. A second explanation focuses on deterioration in external oversight. Expanding restrictions on the media and some nongovernmental organizations in recent years may have reduced the ability of these groups to disseminate information about government activities and thereby help to hold public officials accountable. A vibrant and diversified civil society with ready access to information is an essential building block for accountability in government.

The results for Russia underscore the fact that policy reforms may be necessary but are not always sufficient to reduce corruption in and of themselves. Fundamental institutional strengthening to ensure policy implementation, build checks and balances, and promote accountability in government is also essential.”

- Box 3.1 Trends in corruption in Russia, p.38

Chart above, Figure 4.15 Clusters based on relative frequency of bribes in specific areas, p.71

For Comment; Why isn't there more demand for better governance in Russia? Is it all beacause of Putin? Or more of cultural thing?

Related;
Business Associations; Good for Development or Not
Moscow Gets Mortgaged

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This page contains a single entry by Paul published on July 27, 2006 12:12 PM.

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